Aqua Protocol
  • Background
    • Introduction
    • Welcome to the World of LSTs
    • Stablecoins on the Market
    • Lending Through Issuing Stablecoins
    • Aqua, the Home of all LSTs
    • TON Ecosystem benefits with Aqua
  • Mechanisms
    • How it works
    • Minting (Borrowing)
    • Repayment
    • Withdrawal
    • Redeem
    • Liquidation
    • Fee model
    • Special parameters
  • Stability and peg mechanisms
    • Stability and Peg Mechanisms in Aqua Protocol
    • Stability pool for AquaUSD under 1 dollar and liquidations.
    • Arbitrage through Redeem if for AquaUSD goes below 1 dollar.
    • Keepers
  • Governance
    • AQUA: The Utility Token of Aqua Protocol & How to Earn an Allocation (AquaXP & AquaRP)
    • Aqua DAO
  • Supplement
    • Roadmap
    • FAQ
    • Security Audits
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  • Borrowing Costs:
  • Repayment Timeline:
  • Collateral Ratios:
  • Deposit & Withdrawal:
  1. Mechanisms

Minting (Borrowing)

Aqua Protocol offers a flexible and user-oriented approach to borrowing (minting) with variable costs and no fixed repayment timeline, subject to certain collateral requirements.

Borrowing Costs:

Minting Fees: 0% fee.

Dynamic Borrow rate:

  • Current Rate: 5%, but this is subject to change based on market conditions.

Repayment Timeline:

  • No Set Payback Period: There is no fixed timeline for repaying loans in Aqua Protocol. Users can keep loans open as long as they maintain a collateral ratio of at least 150%.

  • Redemption Condition: When a user has the lowest collateral ratio in the system, other users can redeem that user's collateral. In these situations, the collateral is sold to them with a 3% premium in AquaUSD, which is then paid to the original borrower (minter).

Collateral Ratios:

Minimum and Recommended Ratios:

  • Minimum (Liquidation) Collateral Ratio (MCR): Set at 150% and less.

  • Redeem Ratio: Established at 150% and above.

  • Minimum Mint Ratio: Set at 200%.

Implications:

  • Avoiding Liquidation: For a loan of 10,000 AquaUSD, it's essential to initially have at least $15,000 worth of LST as collateral. However, it's crucial to remember that the interest fee on the loan is also factored into the CR. Over time, as interest accrues, the total debt increases, potentially affecting the CR. If the loan is held for an extended period and a significant amount of interest accumulates, this can lead to a reduction in the CR, triggering the risk of liquidation. It's important to monitor not only the value of your collateral but also the growing interest to maintain the necessary CR.

  • Avoiding Redemption: To prevent redemption, stay alert and ensure your position does not fall among those with the lowest CR or close to it. Given that the interest fee is included in the CR calculation, a long-standing loan with substantial accrued interest might push your position closer to the redemption threshold.

  • Safety Recommendation: To maintain safety and avoid the risks of liquidation or redemption, keeping a collateral rate significantly higher than 200% is advisable. This higher buffer accounts for fluctuations in the collateral's value and the accumulation of interest fees over time, providing a safer margin against market volatility and debt growth.

Deposit & Withdrawal:

  • Fee Policy: Aqua Protocol charges a 0% fee on both deposits and withdrawals.

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Last updated 13 days ago